Trade War With US Can Affect China's GDP Only One Percentage Point, Says Goldman Sachs

Yicai Global

DATE : Feb 09 2017/SOURCE : Yicai

Trade War With US Can Affect China's GDP Only One Percentage Point, Says Goldman Sachs

(Yicai Global) Feb. 9 -- The economists are busy these days trying to calculate the impact of a possible trade war between China and the US under the Trump Administration on both economies. How would such a likely trade war hurt the world's top two economies? China's annual economic growth will fall by up to one percentage point if US President Donald Trump imposes up to 10 percent blanket punitive tariff on all goods imported from China, answers a managing director from the Goldman Sachs Group Inc.

If Trump raises tariffs, China's exports to the US will decrease by 10 to 25 percent, and thus China's GDP growth rate will drop by 0.4-1 percentage points, says Ha Jiming, vice chairman of Goldman Sachs Investment Management Unit - China, in an article posted on the website of China Finance 40 Forum, a non-governmental research organization.

If China takes "reciprocal" measures such as comprehensively raising tariffs on imports from the US, the US exports to China will also see a drop by 10 to 25 percent, and thus the US GDP growth rate may fall by 0.1-0.25 percentage points.

The US is the second largest trade partner of China, the 2016 data shows, with bilateral trade volume amounted to USD519.6 billion. The same year, the US launched a total of 20 trade remedy investigations over Chinese products, with a value of USD3.7 billion.

"To prevent a possible trade war, China can take measures to further stimulate outbound tourism to the US, or launch service industries over there, including commercial and financial services," Ha Jiming said in the article. "This would help the US export services to China, and ultimately reduce the overall US trade deficit with China."